The federal government has refused to lift income tax brackets in line with inflation, leaving every dollar earned above $190,000 taxed at 47 per cent today. The top income tax threshold now sits at its lowest inflation-adjusted level in 20 years.
That threshold would be $281,450 by now if it had kept pace with inflation since 2008-09, when high earners got a substantial increase under changes initiated by the Howard government. The freeze has sharpened bracket creep, pulling more income into the top rate without any change to the published tax settings.
For high-income earners, the result is simple and immediate: pay packets that rise over time are meeting a tax system that has not moved with them. The gap between the current $190,000 threshold and the inflation-adjusted level it would have reached is now wide enough to be a political as well as a fiscal argument, because the decision not to index the brackets effectively shifts more people into the highest marginal rate as wages rise.
That is the friction at the heart of the issue. The government is not raising the top rate, but it is allowing the existing threshold to stay frozen in real terms, which means the tax burden keeps climbing by stealth. Supporters of indexation say that is the only way to stop bracket creep; opponents have long treated the frozen settings as a quiet way to collect more revenue without changing the headline tax rate.
What happens next is whether the government keeps defending the frozen threshold or faces renewed pressure to link it to inflation. For now, the numbers already tell the story: a top bracket set for another era, and a tax system that has drifted far below the level it would have held if it had simply kept up.
